VW may have passed Toyota (NYSE: TM) as the world's No.1 car company just as Toyota passed GM (NYSE: GM) a year ago. Unfortunately, the companies all operate in an industry where being on the top of the pile does not matter much these days. It is probable that each of these firms loses money on the great majority of the cars they sell. To make matter worse, market share may be a weakness as the auto industry moves out of the recession.
It seems more and more likely that modest sized and nimble auto makers like BMW and Hyundai, who do not have to maintain factories in distant corners of the world and do not have to develop and market dozens of individual products, may hold an advantage in a fragmented car industry. The behemoths rely on their ability to maintain massive capital spending and their cost structures can do them nearly irreparable harm in a weak economy.
According to Reuters, "Volkswagen AG may have passed Toyota Motor Corp as the world's top selling automaker in the first quarter, helped by robust demand in its main markets, while its Japanese rival suffered sharp declines."
The US market is a part of the trap that VW could fall into. While chasing Toyota and GM, it cannot ultimately stay in first place without having a dominant position in the American market. It has turned out that spending huge sums to gain market share in US has been an Achilles heel for both Toyota and GM. Each has made money in the US, but the losses that may accumulate during the recession will be tremendous. If each had focused more on the profitable end of the market and decided it would not maintain a large number of brands, they would probably have been better off.
VW may have gotten what it hoped for, but the price will be higher than it expected.











Reader Comments (Page 1 of 3)
4-17-2009 @ 5:20PM
bluegrassguitar said...
From the article: "It is probable that each of these firms losses money on the great majority of the cars they sell." LOSSES money?? Do you not have anyone on your staff who knows English? Hire a proofreader, for gosh sake!
4-18-2009 @ 6:58AM
Jim said...
Be careful,,,VW's cheapest cars are Mexican immigrants and are as cheaply made as they are priced...You don't get German built construction on anything less than the Passat.
4-18-2009 @ 7:20AM
Loren said...
Are we really supposed to feel sorry for car makers, the unions or their employees? What they have done they have done to themselves. Normal common people cannot buy a car or if you can the interest rate is so high you pay 30 grand for a 20 grand car. It is about time that these crooks are pulled down. If you want a payment deal that they are offering today your credit score has to be over 720, if you are at 600 to 680 you can get credit with a high down payment and high interest. It takes about 3 weeks to get the loan. If you are under 600 your better off at a buy here pay here. There are enough used cars out there that it would not hurt for the majority of car makers to fall and go away.
4-18-2009 @ 8:01AM
paul said...
Volkswagon, for people who cant afford a BMW and think they are too good to drive a Honda!!
4-18-2009 @ 8:06AM
commentsnaz said...
i recently purchased a used infiniti G35 coupe; i had cash in hand (after riding the bus and saving for over 2+ years towards the car of my dreams), had no trade in, etc. in this economy, i thought the car dealerships would be open to working with me. the infiniti dealership wouldn't move at all on the price of the car (or on the tax, title, licence fees, etc) . . . . in the end, they negotiated a whole $200 bucks off the total price; give me a break, it was a total joke and over a month later i still have extreme buyer's remorse.
i don't believe the car dealerships are really hurting financially; flying around in those private planes while so many are fighting to survive . . .
4-18-2009 @ 8:08AM
mcusa226 said...
Hey Loren.....Let me see if I have this right. Sounds like sour grapes to me. Oviously your credit rating is low. Which means you jacked around in school got poor grades and now you have a job that pays little. You want to buy a new car like everyone else but unlike everyone else you choose not to work hard earlier in like and now fing yourself with a low paying job and an appetite for more. Soooo now in your bitter, self pityed state you want the entire auto industry to crumble and fall. Hey then we all would be just like you...A FAILURE........NICE
4-18-2009 @ 8:18AM
R Sanders said...
I'm wondering why Edmunds and others give cars like the Rabbit and the New Beetle such favorable ratings when these vehicles are made in Mexico. The German engineering is there but the production could be less than "German."
4-18-2009 @ 8:24AM
Mike Glen said...
Most Big Business is so insulated from reality its scary. They cry and cry about how no one is buying New cars but don't want to work with people who want to buy.
Personally I will stick with my 10 yr old truck and laugh all the way to the bank.
4-18-2009 @ 8:31AM
Loren said...
mcusa226 My credit rating is 760+ My income is $300K plus. I have a MBA and a PHD. So fellow looser don't talk to me about truth. The unions and greed are the downfall of the auto industry. I believe in capitalism, if you don't produce you fail. I don't look for nor do I want someone esp the government to bail me out. You are most likely one of those welfare union people that expect a hand out just because you were kind enough to show up to work. Where I live, a right to work state, if you are union or not do your job at what I am willing to pay you or hit the bricks. I have made money and I have lost money but not on the backs of common people. I pay my people well and I expect a good days work. I have poeple working for me that have worked hard to get what they have. Two years ago these people were convinced by greedy big business including GMAC,Citi group, and FMC that they had all this value in their homes and that they were safe using the equity to improve their lives. Now they owe hundreds of thousands on homes that are worth thousands because of forclosures in their areas. They still pay there bills some late which effects their credit rating some have had credit cancelled even though they never missed a payment or were never late which reduced their credit rating. Don't get me wrong I have had to cut back. I only bought 4 new trucks this year instead of 5. Its my employees that are good people that suffer.
4-18-2009 @ 9:20AM
Ursula said...
mcusa226, aren't you arrogant to make a statement like this.
And no, I was best in my class
4-18-2009 @ 9:23AM
jules1879 said...
I spent 15 years of my life in a Dealership, there are many different aspects in the building and selling of a vehicle, no metter then brand. It doesn't start with the assembly plants. neither the engine, transmissions, seats and other misc. parts are made there. So add in the costs, health benefits etc.. from those companys first, then you have shipping costs. Once everything arrives at the auto plants, you start dealing with with the UAW. There job is physically very hard, no a/c time limits etc. after the vehicle is assembled it is then transported, either by train or transport trucks, ( more individual companys and costs). Then they hit the Dealerships. Dealerships are only allowed so much inventory. The more they sell the more they a are allowed to keep on their lot. Dealership employees by no means are over paid. The only union employees at a dealership are your service technicians, and that is not at all dealerships. Then come cost and insurance to keep these vehicle on the lot, the upkeep of the property and payroll, etc. for their employees. I agree the UAW needs to make larger concessions, but so do these other companies that are involved.
4-18-2009 @ 9:50AM
joseph said...
We have got to STOP buying JAP and Nazi made autos.!!!!!
4-18-2009 @ 10:07AM
matt122801 said...
You are all a bunch of idiots! First, to complain about financing you must understand that the dealership is the "go between" not the source and second, your credit score is YOUR fault. I mean, give me a break now you morans are blaming dealerships because you chose not to pay your bills on time! Credit scores are based on risk and if you are a high risk then someone may not want to give you a loan, and if they do they want to make money! And just because things are slow how does that make sense for someone to lose money to sell you a car? Poor me, I can't buy a car for half price.... I think this guy should make dumb decisions and go out of business too.
4-18-2009 @ 10:03AM
Ann Adams said...
The Volkswagen Group was one of the first employers to promote equal opportunities for women and now has the highest proportion of women among its workforce of any auto manufacturer. Now, let us look at GM who still has over 85% of its middle to upper management as white men. The problem with GM is while other companies in America had a diverse workforce of around 49% women and 51% men. Diversity which results in a company being 65% more productive and prevents groupthink and stale ideas, GM continues to keep its male only policy when it comes to its white collar management and contracting partners.
4-18-2009 @ 10:24AM
Sean` said...
Once again the European engineers are showing everyone else what they are doing wrong, I love my Audi (cousin/superior to the VW), and have relatively few problems with it. Maybe the successful car companies should buy out all of the troubled US companies and make their vehicle lineup better (and slimmer), faster, and more fuel efficient like their line-ups...in this time we cannot be ignorant and think "dont buy anything unless its made in the US", we must think "maybe we should invest in the best and brightest products". If U.S. companies can continue to compete with foreign companies than I will buy the U.S products (because they are cheaper-duh) but if I think another foreign company has the edge I would definitely fork over the extra dough for a better product.
4-18-2009 @ 10:20AM
Quentin Haning said...
Loren, I are a pHD also. we mustof went to the collitch togit are phDs. Imeen the SAME college, uf corse. You seam to b the CEO of your owne compny. how did you git thair whin lyou cant right good englsh. Higher a poof reeder.
4-19-2009 @ 12:32AM
TY My Sexy Wife said...
IT MAKES ME SICK ANYONE THAT BUYING FOREIGN CARS ARE HELPING RAGS BOMB US THEY SHOULD BAN THOSE JUNK CARS IN USA OUR AMERICAN CARS HAVE BEEN HERE LONG BEFORE THESE JUNKERS ITS NOT TRUE THEY LAST LONGER ANYCAR CAN BREAK IT SICKENS ME AMERICANS WILL LOSE WORK THEY SHOULD CLOSE THIS COUNTRY TO EVERYTHING BEFORE ITS TO LATE SIT OF IT
4-20-2009 @ 4:32PM
larry said...
WITH OBAMA AND THAT GANG OF TAX CHEATS AND CROOKS (HIS ADMINISTRATION) IN CHARGE THE U.S. WILL BE NEVER FIRST IN ANYTHING--------
4-18-2009 @ 10:30AM
Sean` said...
Larry, this isn't about politics, its about automakers and industry.....Obama's "gang" as you like to put it has had very little time to do anything so far, give them a year or so and see what the result is (bet it's better than that spoiled child we had in office last year---what was his name again?)...I bet we end up out of recession before the end of the year and more jobs are made available.....stop talking politics you sore republican loser! If you haven't noticed some government handouts stopped because of our current administration-take AIG for instance. Do the research before you open your mouth, or at least have a clue what you are talking about.....
4-18-2009 @ 11:05AM
patricia said...
Government is at the root of all evil. It piles on ridiculous regulations and mandates on auto makers and state governments charge exorbitant taxes both on the sale of new cars and on license plate renewals. Politicians were also instrumental in giving unions such tremendous clout and in companies substituting lavish benefits instead of increased salaries so workers could avoid onerous taxation. Now, government is helping to destroy these companies. What a world.